Member Sign In

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

What would you like to follow?

Walmart Inc. (WMT - Free Report) took yet another step to improve international business. It struck a deal to sell an 80% stake of its underperforming Brazil business to global private equity fund, Advent International. This move once again highlights Walmart’s strategy of shifting focus away from underperforming areas, so as to concentrate more on profitable regions like India and China.

The deal, which is expected to conclude later this year, remains subject to regulatory sanctions in Brazil.

Though Walmart anticipates recording a non-cash net loss of roughly $4.5 billion in the second quarter, the company expects it to remain neutral to the bottom line this fiscal year. In fact, the deal is expected to be slightly accretive to Walmart’s bottom line in the next fiscal year.

Given these factors, the news was welcomed by investors who remain encouraged about Walmart’s solid efforts to strengthen its international operations and stay firm against Amazon (AMZN - Free Report) . Notably, shares of world’s largest retailer gained close to 3% yesterday, while it has rallied almost 9% in a year, outpacing the industry’s 6.8% upside. Let’s delve deeper and see how Walmart is placed.

Walmart to Sell Majority Stake in Brazil

There have been rounds for a while about Walmart looking for ways to get out of its struggling Brazilian business. Sources revealed that this big-box retailer, in Brazil, has been bearing the brunt of consumers’ unfavorable response and intense competition along with macroeconomic hurdles like recession and political disorders. These factors have been hindering Walmart’s operations in this Latin American market, where it has been operating for more than two decades now.

Consequently, the company undertook the aforementioned move of divesting majority stake in Walmart Brazil to Advent. With its robust Brazilian presence and solid experience in the retail investment arena, Advent is most likely to solidify Walmart Brazil’s operations and place it well for long-term growth. Also, with its continued assistance and unmatchable retail experience, Walmart (which will retain the remaining 20% stake) will help its Brazilian business tap opportunities for long-term growth.

Clearly, this reflects Walmart’s continued efforts to correct the slipups made in the international space. This also became apparent last month, when the company clinched contracts to buy an initial stake of 77% in India’s leading e-commerce player Flipkart for roughly $16 billion. On the other hand, Walmart decided to merge its UK grocery unit, Asda with J Sainsbury plc (JSAIY - Free Report) . Walmart’s Asda had been losing market share to discount chains like Aldi and Lidl for quite some time, thereby weighing on Walmart’s UK operations.

These moves along with Walmart’s previous decision to shut its first-party e-commerce business in Brazil reflect its commitment toward allocating resources in profitable regions only. We expect these endeavors to enhance Walmart’s international segment, which constituted nearly 25% of the company’s total revenues in the first quarter of fiscal 2019.

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

Client Support

Follow Us

Zacks Moblie App

Zacks Research is Reported On:

Yahoo

MSN

Marketwatch

Nasdaq

Forbes

Investors.com

Morningstar

Copyright 2018 Zacks Investment Research

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25% per year. These returns cover a period from 1988-2017. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

Visit performance for information about the performance numbers displayed above.

We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms and Conditions of Service.